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发帖数: 384 | 1 If Warren Buffett Traded Options ...
Dylan Jovine
THE VERY FIRST TIME IT HAPPENED TO ME, I KNEW I WAS HOOKED.
The year was 1994. I was a young stockbroker. Full of vim and vigor.
Ready to take on the world and all who stood in my way.
How could I not be? I had always dreamed of working on Wall Street, and
here I was. I still couldn't believe my luck.
I was working on the very same street where J.P. Morgan himself used to go
to work every day ... on the very same street where our first Treasury
Secretary Alexander Hamilton, an unparalleled genius, laid the groundwork
for our incredible financial system ... on the very same street our first
President, George Washington, took the first oath of office ever
administered by our great republic.
Now all I had to do was find my niche ... find a special way to make money
for my clients.
And on a hot Friday in June, suddenly it happened.
Five days earlier, on Monday, I had begun recommending to my clients a small
insurance company that traded on the NASDAQ. The name of the company was
US Reinsurance (SYM: USRE). The stock was trading in the $9 range at the
time.
I loaded the boat. Pitched it to virtually every customer I had. By the
end of the day Thursday, my customers owned well over 100,000 shares of the
stock.
That's when it happened:
Friday morning on my way to work I read in The Wall Street Journal that US
Re was being acquired for $15 a share -- a 66% profit in just 5 days.
Like Paul on the road to Damascus, I was thunderstruck. I had "seen the
light" and was an immediate convert. This was the angle I had been looking
for all this time! It was almost perfect -- the ultimate "WIN-WIN" scenario
to make commissions selling the stock as soon as it was taken over.
From that moment on, my sole mission was to find stocks that I thought were
going to be taken over. To do that, I had to find stocks selling for far
less than they were worth -- undervalued gems that promised huge returns in
short periods of time.
But how could I do that consistently? The last thing I wanted to become was
a one-hit wonder.
That's how I first discovered Warren Buffett. It was his writings that
taught me how to systematically find stocks selling for less than they were
worth.
And one of Buffett's first rules is to make sure you only invest in
companies that you understand. At the time, that meant I had to stay in 3
sectors: banking, insurance and telecommunications.
Talk about being in the right place at the right time: it just so happened
that the very 3 sectors I understood best were the same sectors undergoing
tremendous consolidation in the 1990's!
As great as USRE was, I don't know if it compares to the summer I had in
1996 when I scored "back to back" takeovers in the banking sector. I
remember it like it was yesterday because it was the summer that Netscape
went public, the first shot across the bow of the coming internet revolution
.
My first banking recommendation that summer was Michigan National Bank (SYM:
MNCO), which my clients started buying at $70 share. Within weeks, it was
taken over at $110 per share for a fast and easy 57% profit.
As soon as we sold Michigan National, we rolled our money into stock in J.P.
Morgan to my clients. Within weeks, J.P. Morgan was acquired by Chase
Manhattan Bank for fast profits in the 70% range.
I am not exaggerating when I tell you that I was on such a hot-streak that
my co-workers thought I was being handed inside information. My boss
thought the S.E.C. was going to knock on the door any day.
For some reason, they just couldn't believe that you could actually do solid
research to get these kinds of winners. They couldn't believe that behind
each takeover was a pattern ... a pattern I had recognized and was profiting
from ... a pattern that only a handful of people had discovered and were
using to make money.
But as good as those winners were, they paled in comparison to the biggest
takeover of my career: ACC Corp (SYM: ACCC) out of Rochester New York.
By this time, I had become so successful that my clients had backed me
financially to start my own firm, Lexington Capital Partners. As proud as I
was that I had finally started my own firm, nothing made me prouder than
the address: 100 Wall Street, 3rd Floor.
It wasn't long before I became so busy running the firm that I didn't have
as much time to do the research that made me so successful in the first
place. With 3 offices and over 120 employees, it's fair to say that I was
busy running the firm morning, noon and night.
But I still personally advised a small book of large clients (many who
backed the firm), and together we purchased close to 500,000 shares of ACC
between $13 3/4 and $20 per share, with an average purchase price in the $16
range.
And then, just like that, one day I came into the office and the company
announced it was being acquired by AT & T for roughly $50 a share -- a total
gain of over 250% for my clients overnight!
Looking back now, that seems like one of the best months of my life. I had
literally been working myself to death, and was days away from going on a
long-planned vacation to Florida when the news was announced. I can't tell
you how good it felt to go on vacation right after making my customers $18
million in profits so quickly. (It didn't hurt that I personally made $400,
000 from the ACC bonanza myself.)
It was the best vacation of my life, and it's due in large part to being
able to get away with enough money in my pocket to enjoy whatever I wanted,
whenever I wanted.
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